SAN
DIEGO, Aug. 5, 2024 /PRNewswire/ -- Realty Income
Corporation (Realty Income, NYSE: O), The Monthly Dividend
Company®, today announced operating results for the
three and six months ended June 30,
2024. All per share amounts presented in this press release
are on a diluted per common share basis unless stated
otherwise.
COMPANY HIGHLIGHTS:
For the three months ended June 30,
2024:
- Net income available to common stockholders was $256.8 million, or $0.29 per share
- Adjusted Funds from Operations ("AFFO") per share increased
6.0% to $1.06, compared to the three
months ended June 30, 2023
- Invested $805.8 million at an
initial weighted average cash yield of 7.9%
- Net Debt and Preferred Stock to Annualized Pro Forma Adjusted
EBITDAre was 5.3x
- Achieved a rent recapture rate of 105.7% on properties
re-leased
Event subsequent to June 30,
2024:
- ATM forward agreements for a total of 8.3 million shares remain
unsettled with total expected net proceeds of approximately
$447.8 million, of which 3.7 million
shares were executed in July
2024
CEO Comments
"I am pleased with the continued momentum and acceleration
compared to the first quarter, as evidenced by AFFO per share
growth of 6.0% compared to the same quarter in 2023," said
Sumit Roy, Realty Income's President
and Chief Executive Officer. "Supporting our stable and growing
cash flow stream, our liquidity position remains strong, and our
operations and portfolio of leading clients are healthy. Given
these strengths, I am confident our global, diversified platform
remains positioned to continue to deliver favorable risk-adjusted
returns, given our current visibility into our future pipeline of
opportunities."
Select Financial Results
The following summarizes our select financial results (dollars
in millions, except per share data).
|
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Total
revenue
|
|
$
1,339.4
|
|
$
1,019.2
|
|
$
2,599.9
|
|
$
1,963.6
|
|
Net income available to
common stockholders (1) (2)
|
|
$
256.8
|
|
$
195.4
|
|
$
386.5
|
|
$
420.4
|
|
Net income per
share
|
|
$
0.29
|
|
$
0.29
|
|
$
0.45
|
|
$
0.63
|
|
Funds from operations
available to common
stockholders (FFO) (3)
|
|
$
929.1
|
|
$
688.0
|
|
$
1,714.8
|
|
$
1,372.3
|
|
FFO per
share
|
|
$
1.07
|
|
$
1.02
|
|
$
2.01
|
|
$
2.05
|
|
Normalized funds from
operations available to
common stockholders (Normalized FFO)
(3)
|
|
$
931.9
|
|
$
688.3
|
|
$
1,811.7
|
|
$
1,373.9
|
|
Normalized FFO per
share
|
|
$
1.07
|
|
$
1.02
|
|
$
2.12
|
|
$
2.06
|
|
Adjusted funds from
operations available to common
stockholders (AFFO) (3)
|
|
$
921.1
|
|
$
671.7
|
|
$
1,783.9
|
|
$
1,322.5
|
|
AFFO per
share
|
|
$
1.06
|
|
$
1.00
|
|
$
2.09
|
|
$
1.98
|
|
|
|
(1)
|
The calculation to
determine net income attributable to common stockholders includes
provisions for impairment, gain on sales of real estate, and
foreign currency gain and loss. These items can vary from quarter
to quarter and can significantly impact net income available to
common stockholders and period to period comparisons.
|
|
(2)
|
Our financial results
during the three and six months ended June 30, 2024 were
impacted by the following transactions: (i) merger and
integration-related costs related to our merger with Spirit Realty
Capital, Inc. ("Spirit") of $2.8 million and $96.9 million,
respectively, and (ii) $96.5 million and $185.9 million of
provisions for impairment, respectively.
|
|
(3)
|
FFO, Normalized FFO,
and AFFO are non-GAAP financial measures. Normalized FFO is based
on FFO and adjusted to exclude merger and integration-related costs
and AFFO further adjusts Normalized FFO for unique revenue and
expense items. Please see the Glossary for our definitions and
explanations of how we utilize these metrics. Please see pages
10 and 11 herein for reconciliations to the most directly
comparable GAAP measure.
|
Dividend Increases
We have continued our 55-year history of paying monthly
dividends. In addition, we have increased our dividend four times
to date during 2024. As of July 2024,
we have paid 107 consecutive quarterly dividend increases and
increased the dividend 126 times since our listing on the New York
Stock Exchange ("NYSE") in 1994. The annualized dividend amount as
of June 30, 2024 was $3.156 per share. The amount of monthly dividends
paid per share increased 1.6% to $0.777 during the three months ended June 30, 2024, as compared to $0.765 for the same period in 2023, representing
73.3% of our diluted AFFO per share of $1.06 during the three months ended June 30, 2024.
Real Estate Portfolio Update
As of June 30, 2024, we owned or
held interests in 15,450 properties, which were leased to 1,551
clients doing business in 90 industries. Our diversified portfolio
of commercial properties under long-term, net lease agreements is
actively managed with a weighted average remaining lease term of
approximately 9.6 years. Our portfolio of commercial real estate
has historically provided dependable rental revenue supporting the
payment of monthly dividends. As of June 30,
2024, portfolio occupancy was 98.8% with 185 properties
available for lease or sale, as compared to 98.6% as of
March 31, 2024 and 99.0% as of
June 30, 2023. Our property-level
occupancy rates exclude properties with ancillary leases only, such
as cell towers and billboards, and properties with possession
pending and include properties owned by unconsolidated joint
ventures. Below is a summary of our portfolio activity for the
period indicated below:
Changes in Occupancy
|
Three months ended
June 30, 2024
|
|
|
Properties available
for lease at March 31, 2024
|
217
|
|
Lease expirations
(1)
|
185
|
|
Re-leases to same
client
|
(144)
|
|
Re-leases to new
client
|
(9)
|
|
Vacant
dispositions
|
(64)
|
|
Properties available
for lease at June 30, 2024
|
185
|
|
|
|
Six months ended
June 30, 2024
|
|
|
Properties available
for lease at December 31, 2023
|
193
|
|
Lease expirations
(1)
|
430
|
|
Re-leases to same
client
|
(310)
|
|
Re-leases to new
client
|
(21)
|
|
Vacant
dispositions
|
(107)
|
|
Properties available
for lease at June 30, 2024
|
185
|
|
|
|
(1)
|
Includes scheduled and
unscheduled expirations (including leases rejected in bankruptcy),
as well as future expirations resolved in the periods indicated
above.
|
During the three months ended June 30,
2024, the new annualized contractual rent on re-leases was
$33.73 million, as compared to the
previous annual rent of $31.91
million on the same units, representing a rent recapture
rate of 105.7% on the units re-leased. We re-leased five units to
new clients without a period of vacancy, and eight units to new
clients after a period of vacancy. Please see the Glossary for our
definition of annualized contractual rent.
During the six months ended June 30,
2024, the new annualized contractual rent on re-leases was
$93.09 million, as compared to the
previous annual rent of $88.82
million on the same units, representing a rent recapture
rate of 104.8% on the units re-leased. We re-leased 14 units to new
clients without a period of vacancy, and 15 units to new clients
after a period of vacancy.
Investment Summary
The following table summarizes our investments in the U.S. and
Europe for the period indicated
below:
|
Number
of
Properties
|
|
Investment
($ in
millions)
|
|
Leasable
Square
Feet
(in
thousands)
|
|
Initial
Weighted
Average
Cash Yield
(1)
|
|
Weighted
Average
Term
(Years)
|
|
Three months ended
June 30, 2024
|
|
|
|
|
|
|
|
|
|
|
Acquisitions - U.S.
real estate
|
15
|
|
$
131.1
|
|
525
|
|
7.8 %
|
|
20.5
|
|
Acquisitions -
Europe real estate
|
6
|
|
115.3
|
|
500
|
|
8.1 %
|
|
6.3
|
|
Total real estate
acquisitions
|
21
|
|
$
246.4
|
|
1,025
|
|
7.9 %
|
|
13.8
|
|
Real estate properties
under development (2)
|
99
|
|
181.9
|
|
5,599
|
|
7.3 %
|
|
14.6
|
|
Other investments
(3)
|
—
|
|
377.5
|
|
—
|
|
8.1 %
|
|
6.0
|
|
Total investments
(4)
|
120
|
|
$
805.8
|
|
6,624
|
|
7.9 %
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, 2024
|
|
|
|
|
|
|
|
|
|
|
Acquisitions - U.S.
real estate
|
20
|
|
$
147.1
|
|
719
|
|
7.7 %
|
|
19.3
|
|
Acquisitions -
Europe real estate
|
14
|
|
417.9
|
|
1,564
|
|
8.2 %
|
|
6.2
|
|
Total real estate
acquisitions
|
34
|
|
$
565.0
|
|
2,283
|
|
8.1 %
|
|
9.5
|
|
Real estate properties
under development (2)
|
164
|
|
461.3
|
|
6,517
|
|
7.3 %
|
|
14.9
|
|
Other investments
(3)
|
—
|
|
377.5
|
|
—
|
|
8.1 %
|
|
6.0
|
|
Total investments
(5)
|
198
|
|
$
1,403.8
|
|
8,800
|
|
7.8 %
|
|
10.2
|
|
|
|
(1)
|
Initial weighted
average cash yield is a supplemental operating measure. Cash income
used in the calculation of initial weighted average cash yield for
investments for the six months ended June 30, 2024 includes $0.5
million received as settlement credits as reimbursement of free
rent periods. There were no settlement credits for the three months
ended June 30, 2024. Please see the Glossary for our definitions of
Initial Weighted Average Cash Yield and Cash Income.
|
|
(2)
|
The three months ended
June 30, 2024 includes £26.4 million of investments relating to
U.K. development properties, €9.3 million of investments relating
to Spain development properties, €6.9 million of investments
relating to Portugal development properties, and $14.2
million of investments in an unconsolidated U.S. data center
joint venture, converted at the applicable exchange rates on the
funding dates. The six months ended June 30, 2024 includes £35.2
million of investments relating to U.K. development
properties, €17.7 million of investments relating to Spain
development properties, €6.9 million of investments relating to
Portugal development properties, and $52.3 million of investments
in an unconsolidated U.S. data center joint venture, converted at
the applicable exchange rates on the funding dates.
|
|
(3)
|
For the three and six
months ended June 30, 2024, other investments relate to an
investment in a senior secured note issued by a parent company of
Asda based in the U.K.
|
|
(4)
|
Clients we have
invested in are 89.1% retail, 9.3% industrial, and 1.6% other based
on cash income. Approximately 10% of the annualized cash income
generated from acquisitions is from investment grade rated clients,
their subsidiaries or affiliated companies. Please see the Glossary
for our definition of Investment Grade Clients and Cash
Income.
|
|
(5)
|
Clients we have
invested in are 87.2% retail, 9.5% industrial, and 3.3% other based
on cash income. Approximately 24% of the annualized cash income
generated from acquisitions is from investment grade rated clients,
their subsidiaries or affiliated companies.
|
Same Store Rental Revenue
The following summarizes our same store rental revenue for
13,602 and 11,671 properties under lease for the three and six
months ended June 30, 2024,
respectively (dollars in millions):
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
%
Increase
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Three
Months
|
|
Six
Months
|
|
Same store rental
revenue
|
$
1,000.4
|
|
$
998.2
|
|
$
1,680.4
|
|
$
1,673.1
|
|
0.2 %
|
|
0.4 %
|
For purposes of comparability, same store rental revenue is
presented on a constant currency basis using the applicable
exchange rate as of June 30, 2024.
None of the properties in France,
Germany, Ireland or Portugal met our same store pool definition
for the periods presented. Beginning with the second quarter of
2024, properties acquired through the merger with Spirit were
considered under each element of our Same Store Pool criteria,
except for the requirement that the property be owned for the full
comparative period. If the property was owned by Spirit for the
full comparative period and each of the other criteria were met,
the property was included in our Same Store Pool. Please see the
Glossary to see definitions of our Same Store Pool and Same Store
Rental Revenue.
Property Dispositions
The following summarizes our property dispositions (dollars in
millions):
|
Three months
ended
June 30,
2024
|
|
Six months
ended
June 30, 2024
|
|
Properties
sold
|
76
|
|
122
|
|
Net sales
proceeds
|
$
106.3
|
|
$
201.9
|
|
Gain on sale of real
estate
|
$
25.2
|
|
$
41.7
|
Liquidity and Capital Markets
Capital Raising
During the three months ended
June 30, 2024, 3.5 million shares of
common stock were sold, but remain unsettled, pursuant to forward
sale agreements through our ATM program. As of June 30, 2024, there were approximately 4.7
million shares of unsettled common stock subject to forward sale
agreements through our ATM program, representing approximately
$247.8 million in expected net
proceeds and a weighted average initial gross price of $53.32 per share. ATM net sale proceed amounts
assume full physical settlement of all outstanding shares of common
stock, subject to such forward sale agreements and certain
assumptions made with respect to settlement dates. As of
August 5, 2024, ATM forward agreements for a total of 8.3
million shares remain unsettled with total expected net proceeds of
approximately $447.8 million, of
which 3.7 million shares were executed in July 2024.
Liquidity
As of June 30, 2024, we had
$3.8 billion of liquidity, which
consists of cash and cash equivalents of $442.8 million, unsettled ATM forward equity of
$247.8 million, and $3.1 billion of availability under our
$4.25 billion unsecured revolving
credit facility, net of $846.6
million of borrowing on the revolving credit facility and
after deducting $302.2 million in
borrowings under our commercial paper programs. We use our
unsecured revolving credit facility as a liquidity backstop for the
repayment of the notes issued under these programs.
Earnings Guidance
Summarized below are approximate estimates of the key components
of our 2024 earnings guidance.
|
|
Prior 2024 Guidance
(1)
|
|
Revised 2024
Guidance
|
|
Net income per share
(2)
|
|
$1.26 -
$1.35
|
|
$1.21 -
$1.30
|
|
Real estate
depreciation and impairments per share (3)
|
|
$2.84
|
|
$2.92
|
|
Other adjustments per
share (3)
|
|
$0.09
|
|
$0.06
|
|
Normalized FFO per
share (2)(4)
|
|
$4.19 -
$4.28
|
|
$4.19 -
$4.28
|
|
AFFO per share
(4)
|
|
$4.15 -
$4.21
|
|
$4.15 -
$4.21
|
|
Same store rent growth
(5)
|
|
Approx 1.0%
|
|
Approx 1.0%
|
|
Occupancy
|
|
Over 98%
|
|
Over 98%
|
|
Cash G&A expenses
(% of revenues) (6)(7)
|
|
Approx 3.0%
|
|
Approx 3.0%
|
|
Property expenses
(non-reimbursable) (% of revenues) (6)
|
|
1.0% - 1.5%
|
|
1.0% - 1.5%
|
|
Income tax
expenses
|
|
$65 - $75
million
|
|
$65 - $75
million
|
|
Investment volume
(8)
|
|
Approx $3.0
billion
|
|
Approx $3.0
billion
|
|
Disposition
volume
|
|
—
|
|
$400 - $500
million
|
|
|
|
|
|
|
(1) As
issued on June 4, 2024.
|
|
(2)
Net income per share and Normalized FFO per share include
non-cash interest expense impact related to the Spirit
merger.
|
|
(3)
Includes gain on sales of properties and merger and
integration-related costs.
|
|
(4)
Normalized FFO per share and AFFO per share exclude merger and
integration-related costs. Per share amounts may not add due to
rounding.
|
|
(5) Reserve
reversals recognized in 2023 represent an approximately 30 basis
point headwind to same store rent growth in 2024.
|
|
(6) Revenue
excludes contractually obligated reimbursements by our clients.
Cash G&A expenses exclude stock-based compensation
expense.
|
|
(7) G&A
expenses inclusive of stock-based compensation expense as a
percentage of rental revenue, excluding reimbursements, is expected
to be
approximately 3.4% - 3.7% in 2024.
|
|
(8)
Investment volume excludes merger with Spirit, which closed January
23, 2024.
|
Conference Call Information
In conjunction with the release of our operating results, we
will host a conference call on August 6, 2024 at 11:00 a.m. PDT to discuss the operating results.
To access the conference call, dial (833) 816-1264 (United States) or (412) 317-5632
(International). When prompted, please ask for the Realty Income
conference call.
A telephone replay of the conference call can also be accessed
by calling (877) 344-7529 (United
States) or (412) 317-0088 (International) and entering the
conference ID 5149409. The telephone replay will be available
through August 13, 2024.
A live webcast will be available in listen-only mode by clicking
on the webcast link on the company's home page at
www.realtyincome.com. A replay of the conference call webcast will
be available approximately one hour after the conclusion of the
live broadcast. No access code is required for this replay.
Supplemental Materials and Sustainability Report
Supplemental Operating and Financial Data for the six months
ended June 30, 2024 is available on
our corporate website at
www.realtyincome.com/investors/quarterly-and-annual-results.
The Sustainability Report for the year ended December 31, 2022 is available on our
corporate website at
esg.realtyincome.com/indicators/sustainability_report. We expect to
publish our Sustainability Report for the year ended December 31, 2023 in the third quarter of 2024.
Our Green Financing Framework is also available on our corporate
website at esg.realtyincome.com/indicators/green_financing.
About Realty Income
Realty Income (NYSE: O), an S&P 500 company, is real estate
partner to the world's leading companies. Founded in 1969, we
invest in diversified commercial real estate and have a portfolio
of 15,450 properties in all 50 U.S. states, the U.K., and six other
countries in Europe. We are known
as "The Monthly Dividend Company®," and have a mission
to deliver stockholders dependable monthly dividends that grow over
time. Since our founding, we have declared 649 consecutive
monthly dividends and are a member of the S&P 500 Dividend
Aristocrats® index for having increased our dividend for
the last 29 consecutive years. Additional information about the
company can be found at www.realtyincome.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act of 1934, as amended. When used in
this press release, the words "estimated," "anticipated," "expect,"
"believe," "intend," "continue," "should," "may," "likely,"
"plans," and similar expressions are intended to identify
forward-looking statements. Forward-looking statements include
discussions of our business and portfolio; growth strategies and
intentions to acquire or dispose of properties (including
geographies, timing, partners, clients and terms); re-leases,
re-development and speculative development of properties and
expenditures related thereto; future operations and results; the
announcement of operating results, strategy, plans, and the
intentions of management; guidance; settlement of shares of common
stock sold pursuant to forward sale confirmations under our ATM
program; dividends, including the amount, timing and payments of
dividends related thereto; and trends in our business, including
trends in the market for long-term leases of freestanding,
single-client properties. Forward-looking statements are subject to
risks, uncertainties, and assumptions about us, which may cause our
actual future results to differ materially from expected results.
Some of the factors that could cause actual results to differ
materially are, among others, our continued qualification as a real
estate investment trust; general domestic and foreign business,
economic, or financial conditions; competition; fluctuating
interest and currency rates; inflation and its impact on our
clients and us; access to debt and equity capital markets and other
sources of funding (including the terms and partners of such
funding); continued volatility and uncertainty in the credit
markets and broader financial markets; other risks inherent in the
real estate business including our clients' solvency, client
defaults under leases, increased client bankruptcies, potential
liability relating to environmental matters, illiquidity of real
estate investments, and potential damages from natural disasters;
impairments in the value of our real estate assets; changes in
domestic and foreign income tax laws and rates; property ownership
through joint ventures, partnerships and other arrangements which
may limit control of the underlying investments; epidemics or
pandemics including measures taken to limit their spread, the
impacts on us, our business, our clients, and the economy
generally; the loss of key personnel; the outcome of any legal
proceedings to which we are a party or which may occur in the
future; acts of terrorism and war; the anticipated benefits from
mergers and acquisitions including from the merger with Spirit; and
those additional risks and factors discussed in our reports filed
with the U.S. Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements are not guarantees of future
plans and performance and speak only as of the date of this press
release. Actual plans and operating results may differ materially
from what is expressed or forecasted in this press release. We do
not undertake any obligation to update forward-looking statements
or publicly release the results of any forward-looking statements
that may be made to reflect events or circumstances after the date
these statements were made.
|
CONSOLIDATED
STATEMENTS OF INCOME
(in thousands, except
per share amounts) (unaudited)
|
|
|
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
Rental (including
reimbursable) (1)
|
|
$
1,284,728
|
|
$
995,289
|
|
$
2,492,897
|
|
$
1,920,578
|
|
Other
|
|
54,715
|
|
23,916
|
|
107,031
|
|
43,026
|
|
Total
revenue
|
|
1,339,443
|
|
1,019,205
|
|
2,599,928
|
|
1,963,604
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
605,570
|
|
472,278
|
|
1,186,634
|
|
923,755
|
|
Interest
|
|
246,931
|
|
183,857
|
|
487,545
|
|
337,989
|
|
Property (including
reimbursable)
|
|
99,851
|
|
94,703
|
|
189,212
|
|
164,100
|
|
General and
administrative
|
|
45,070
|
|
36,829
|
|
85,912
|
|
70,996
|
|
Provisions for
impairment
|
|
96,458
|
|
29,815
|
|
185,947
|
|
42,993
|
|
Merger and
integration-related costs
|
|
2,754
|
|
341
|
|
96,858
|
|
1,648
|
|
Total
expenses
|
|
1,096,634
|
|
817,823
|
|
2,232,108
|
|
1,541,481
|
|
Gain on sales of real
estate
|
|
25,153
|
|
7,824
|
|
41,727
|
|
12,103
|
|
Foreign currency and
derivative gain (loss), net
|
|
511
|
|
(2,552)
|
|
4,557
|
|
7,770
|
|
Equity in earnings of
unconsolidated entities
|
|
2,029
|
|
411
|
|
353
|
|
411
|
|
Other income,
net
|
|
6,108
|
|
3,020
|
|
11,554
|
|
5,750
|
|
Income before income
taxes
|
|
276,610
|
|
210,085
|
|
426,011
|
|
448,157
|
|
Income
taxes
|
|
(15,642)
|
|
(12,932)
|
|
(31,144)
|
|
(24,882)
|
|
Net income
|
|
260,968
|
|
197,153
|
|
394,867
|
|
423,275
|
|
Net income attributable
to noncontrolling interests
|
|
(1,577)
|
|
(1,738)
|
|
(3,192)
|
|
(2,844)
|
|
Net income attributable
to the Company
|
|
259,391
|
|
195,415
|
|
391,675
|
|
420,431
|
|
Preferred stock
dividends
|
|
(2,587)
|
|
—
|
|
(5,175)
|
|
—
|
|
Net income available to
common stockholders
|
|
$
256,804
|
|
$
195,415
|
|
$
386,500
|
|
$
420,431
|
|
|
Funds from operations
available to common stockholders
(FFO)
|
|
$
929,133
|
|
$
687,985
|
|
$
1,714,816
|
|
$
1,372,276
|
|
Normalized funds from
operations available to common
stockholders (Normalized FFO)
|
|
$
931,887
|
|
$
688,326
|
|
$
1,811,674
|
|
$
1,373,924
|
|
Adjusted funds from
operations available to common
stockholders (AFFO)
|
|
$
921,074
|
|
$
671,737
|
|
$
1,783,945
|
|
$
1,322,466
|
|
Per share information
for common stockholders:
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.30
|
|
$
0.29
|
|
$
0.45
|
|
$
0.63
|
|
Diluted
|
|
$
0.29
|
|
$
0.29
|
|
$
0.45
|
|
$
0.63
|
|
FFO per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.07
|
|
$
1.02
|
|
$
2.01
|
|
$
2.06
|
|
Diluted
|
|
$
1.07
|
|
$
1.02
|
|
$
2.01
|
|
$
2.05
|
|
Normalized FFO per
common share, basic and diluted
|
|
$
1.07
|
|
$
1.02
|
|
$
2.12
|
|
$
2.06
|
|
AFFO per common share,
basic and diluted
|
|
$
1.06
|
|
$
1.00
|
|
$
2.09
|
|
$
1.98
|
|
Cash dividends paid
per common share
|
|
$
0.7765
|
|
$
0.7650
|
|
$
1.5460
|
|
$
1.5165
|
|
|
|
(1)
|
Includes lease
termination fees recognized in rental revenue of $16.3 million and
$0.6 million for the three months ended June 30, 2024 and 2023,
respectively, and $16.8 million and $3.3 million for the six months
ended June 30, 2024 and 2023, respectively. Also includes rental
revenue (reimbursable) of $80.6 million and $87.7 million for the
three months ended June 30, 2024 and 2023, respectively, and $153.3
million and $147.3 million for the six months ended June 30, 2024
and 2023, respectively. Additionally, it includes reserves to
rental revenue, exclusive of non-cash reserves, of $8.0 million and
$2.9 million for the three months ended June 30, 2024 and 2023,
respectively, and $9.2 million and $4.4 million for the six months
ended June 30, 2024 and 2023, respectively.
|
|
FUNDS FROM
OPERATIONS (FFO) AND NORMALIZED FUNDS FROM OPERATIONS (Normalized
FFO)
(in thousands, except
per share amounts)
|
|
|
FFO and Normalized FFO
are non-GAAP financial measures. Please see the Glossary for our
definitions and explanations of how we utilize these
metrics.
|
|
|
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
Net income available to
common stockholders
|
|
$
256,804
|
|
$
195,415
|
|
$
386,500
|
|
$
420,431
|
|
Depreciation and
amortization
|
|
605,570
|
|
472,278
|
|
1,186,634
|
|
923,755
|
|
Depreciation of
furniture, fixtures and equipment
|
|
(610)
|
|
(297)
|
|
(1,233)
|
|
(839)
|
|
Provisions for
impairment of real estate
|
|
87,204
|
|
29,815
|
|
175,401
|
|
42,993
|
|
Gain on sales of real
estate
|
|
(25,153)
|
|
(7,824)
|
|
(41,727)
|
|
(12,103)
|
|
Proportionate share of
adjustments for unconsolidated
entities
|
|
6,380
|
|
(465)
|
|
11,054
|
|
(465)
|
|
FFO adjustments
allocable to noncontrolling interests
|
|
(1,062)
|
|
(937)
|
|
(1,813)
|
|
(1,496)
|
|
FFO available to common
stockholders
|
|
$
929,133
|
|
$
687,985
|
|
$
1,714,816
|
|
$
1,372,276
|
|
FFO allocable to
dilutive noncontrolling interests
|
|
1,595
|
|
1,371
|
|
2,935
|
|
2,791
|
|
Diluted FFO
|
|
$
930,728
|
|
$
689,356
|
|
$
1,717,751
|
|
$
1,375,067
|
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders
|
|
$
929,133
|
|
$
687,985
|
|
$
1,714,816
|
|
$
1,372,276
|
|
Merger and
integration-related costs
|
|
2,754
|
|
341
|
|
96,858
|
|
1,648
|
|
Normalized FFO
available to common stockholders
|
|
$
931,887
|
|
$
688,326
|
|
$
1,811,674
|
|
$
1,373,924
|
|
Normalized FFO
allocable to dilutive noncontrolling interests
|
|
1,595
|
|
1,371
|
|
2,935
|
|
2,791
|
|
Diluted Normalized
FFO
|
|
$
933,482
|
|
$
689,697
|
|
$
1,814,609
|
|
$
1,376,715
|
|
FFO per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.07
|
|
$
1.02
|
|
$
2.01
|
|
$
2.06
|
|
Diluted
|
|
$
1.07
|
|
$
1.02
|
|
$
2.01
|
|
$
2.05
|
|
Normalized FFO per
common share, basic and diluted
|
|
$
1.07
|
|
$
1.02
|
|
$
2.12
|
|
$
2.06
|
|
Distributions paid to
common stockholders
|
|
$
676,215
|
|
$
515,091
|
|
$
1,312,714
|
|
$
1,012,336
|
|
FFO available to common
stockholders in excess of
distributions paid to common
stockholders
|
|
$
252,918
|
|
$
172,894
|
|
$
402,102
|
|
$
359,940
|
|
Normalized FFO
available to common stockholders in
excess of distributions paid to common
stockholders
|
|
$
255,672
|
|
$
173,235
|
|
$
498,960
|
|
$
361,588
|
|
Weighted average number
of common shares used for FFO
and Normalized FFO:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
870,319
|
|
674,109
|
|
852,621
|
|
667,357
|
|
Diluted
|
|
872,520
|
|
676,388
|
|
854,806
|
|
669,903
|
|
ADJUSTED FUNDS FROM
OPERATIONS (AFFO)
(in thousands, except
per share amounts)
|
|
|
AFFO is a non-GAAP
financial measure. Please see the Glossary for our definition and
an explanation of how we utilize this metric.
|
|
|
|
Three months
ended
June
30,
|
|
Six months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Net income available to
common stockholders
|
|
$
256,804
|
|
$
195,415
|
|
$
386,500
|
|
$
420,431
|
|
Cumulative adjustments
to calculate Normalized FFO (1)
|
|
675,083
|
|
492,911
|
|
1,425,174
|
|
953,493
|
|
Normalized FFO
available to common stockholders
|
|
931,887
|
|
688,326
|
|
1,811,674
|
|
1,373,924
|
|
Amortization of
share-based compensation
|
|
7,267
|
|
7,623
|
|
16,519
|
|
13,923
|
|
Amortization of net
debt discounts (premiums) and deferred
financing costs (2)
|
|
799
|
|
(10,509)
|
|
5,000
|
|
(24,197)
|
|
Non-cash gain on
interest rate swaps
|
|
(1,799)
|
|
(1,799)
|
|
(3,600)
|
|
(3,600)
|
|
Non-cash change in
allowance for credit losses
|
|
9,254
|
|
—
|
|
10,546
|
|
—
|
|
Straight-line impact of
cash settlement on interest rate
swaps (3)
|
|
1,797
|
|
1,797
|
|
3,595
|
|
3,595
|
|
Leasing costs and
commissions
|
|
(2,129)
|
|
(5,032)
|
|
(3,056)
|
|
(5,476)
|
|
Recurring capital
expenditures
|
|
(52)
|
|
(85)
|
|
(52)
|
|
(138)
|
|
Straight-line rent and
expenses, net
|
|
(47,587)
|
|
(33,963)
|
|
(92,447)
|
|
(70,448)
|
|
Amortization of above
and below-market leases, net
|
|
13,806
|
|
19,670
|
|
28,080
|
|
37,028
|
|
Proportionate share of
adjustments for unconsolidated
entities
|
|
(538)
|
|
—
|
|
382
|
|
—
|
|
Other adjustments
(4)
|
|
8,369
|
|
5,709
|
|
7,304
|
|
(2,145)
|
|
AFFO available to
common stockholders
|
|
$
921,074
|
|
$
671,737
|
|
$
1,783,945
|
|
$
1,322,466
|
|
AFFO allocable to
dilutive noncontrolling interests
|
|
1,587
|
|
1,382
|
|
2,946
|
|
2,813
|
|
Diluted AFFO
|
|
$
922,661
|
|
$
673,119
|
|
$
1,786,891
|
|
$
1,325,279
|
|
AFFO per common share,
basic and diluted
|
|
$
1.06
|
|
$
1.00
|
|
$
2.09
|
|
$
1.98
|
|
Distributions paid to
common stockholders
|
|
$
676,215
|
|
$
515,091
|
|
$
1,312,714
|
|
$
1,012,336
|
|
AFFO available to
common stockholders in excess of
distributions paid to common
stockholders
|
|
$
244,859
|
|
$
156,646
|
|
$
471,231
|
|
$
310,130
|
|
Weighted average number
of common shares used for
AFFO:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
870,319
|
|
674,109
|
|
852,621
|
|
667,357
|
|
Diluted
|
|
872,520
|
|
676,388
|
|
854,806
|
|
669,903
|
|
|
|
(1)
|
See Normalized FFO
calculations on page 10 for reconciling items.
|
|
(2)
|
Includes the
amortization of net premiums and discounts on notes payable and
assumption of our mortgages payable, which are being amortized over
the life of the applicable debt, and costs incurred and capitalized
upon issuance and exchange of our notes payable, assumption of our
mortgages payable and issuance of our term loans, which are also
being amortized over the lives of the applicable debt. No costs
associated with our credit facility agreements or annual fees paid
to credit rating agencies have been included.
|
|
(3)
|
Represents the
straight-line amortization of $72.0 million gain realized upon the
termination of $500.0 million in notional interest rate swaps in
October 2022, over the term of the $750.0 million of 5.625% senior
unsecured notes due October 2032.
|
|
(4)
|
Includes non-cash
foreign currency losses (gains) from remeasurement to USD,
mark-to-market adjustments on investments and derivatives that are
non-cash in nature, straight-line payments from cross-currency
swaps, obligations related to financing lease liabilities, and
adjustments allocable to noncontrolling interests.
|
|
HISTORICAL FFO AND
AFFO
(in thousands, except
per share amounts)
|
|
|
For the three months
ended June 30,
|
|
2024
|
|
2023
|
|
2022
|
|
2021
|
|
2020
|
|
Net income available to
common stockholders
|
|
$
256,804
|
|
$
195,415
|
|
$
223,207
|
|
$
124,479
|
|
$
107,824
|
|
Depreciation and
amortization, net of furniture,
fixtures and equipment
|
|
604,960
|
|
471,981
|
|
408,948
|
|
187,716
|
|
168,176
|
|
Provisions for
impairment of real estate
|
|
87,204
|
|
29,815
|
|
7,691
|
|
17,246
|
|
13,869
|
|
Gain on sales of real
estate
|
|
(25,153)
|
|
(7,824)
|
|
(40,572)
|
|
(14,901)
|
|
(1,323)
|
|
Proportionate share of
adjustments for
unconsolidated entities
|
|
6,380
|
|
(465)
|
|
9,860
|
|
—
|
|
—
|
|
FFO adjustments
allocable to noncontrolling
interests
|
|
(1,062)
|
|
(937)
|
|
(319)
|
|
(165)
|
|
(208)
|
|
FFO available to common
stockholders
|
|
$
929,133
|
|
$
687,985
|
|
$
608,815
|
|
$
314,375
|
|
$
288,338
|
|
Merger and
integration-related costs
|
|
2,754
|
|
341
|
|
2,729
|
|
13,298
|
|
—
|
|
Normalized FFO
available to common stockholders
|
|
$
931,887
|
|
$
688,326
|
|
$
611,544
|
|
$
327,673
|
|
$
288,338
|
|
FFO per diluted
share
|
|
$
1.07
|
|
$
1.02
|
|
$
1.01
|
|
$
0.84
|
|
$
0.84
|
|
Normalized FFO per
diluted share
|
|
$
1.07
|
|
$
1.02
|
|
$
1.02
|
|
$
0.88
|
|
$
0.84
|
|
AFFO available to
common stockholders
|
|
$
921,074
|
|
$
671,737
|
|
$
583,728
|
|
$
327,647
|
|
$
295,241
|
|
AFFO per diluted
share
|
|
$
1.06
|
|
$
1.00
|
|
$
0.97
|
|
$
0.88
|
|
$
0.86
|
|
Common stock dividends
paid
|
|
$
0.7765
|
|
$
0.7650
|
|
$
0.7410
|
|
$
0.7050
|
|
$
0.6990
|
|
Weighted average
diluted shares outstanding - FFO,
Normalized FFO and AFFO
|
|
872,520
|
|
676,388
|
|
603,091
|
|
374,804
|
|
344,148
|
|
|
|
|
|
|
|
|
|
|
|
|
For the six months
ended June 30,
|
|
2024
|
|
2023
|
|
2022
|
|
2021
|
|
2020
|
|
Net income available to
common stockholders
|
|
$
386,500
|
|
$
420,431
|
|
$
422,576
|
|
$
220,419
|
|
$
254,651
|
|
Depreciation and
amortization, net of furniture,
fixtures and equipment
|
|
1,185,401
|
|
922,916
|
|
812,232
|
|
365,330
|
|
332,635
|
|
Provisions for
impairment of real estate
|
|
175,401
|
|
42,993
|
|
14,729
|
|
19,966
|
|
18,347
|
|
Gain on sales of real
estate
|
|
(41,727)
|
|
(12,103)
|
|
(50,728)
|
|
(23,302)
|
|
(39,829)
|
|
Proportionate share of
adjustments for
unconsolidated entities
|
|
11,054
|
|
(465)
|
|
12,095
|
|
—
|
|
—
|
|
FFO adjustments
allocable to noncontrolling
interests
|
|
(1,813)
|
|
(1,496)
|
|
(673)
|
|
(331)
|
|
(363)
|
|
FFO available to common
stockholders
|
|
$
1,714,816
|
|
$
1,372,276
|
|
$
1,210,231
|
|
$
582,082
|
|
$
565,441
|
|
Merger and
integration-related costs
|
|
96,858
|
|
1,648
|
|
9,248
|
|
13,298
|
|
—
|
|
Normalized FFO
available to common stockholders
|
|
$
1,811,674
|
|
$
1,373,924
|
|
$
1,219,479
|
|
$
595,380
|
|
$
565,441
|
|
FFO per diluted
share
|
|
$
2.01
|
|
$
2.05
|
|
$
2.02
|
|
$
1.56
|
|
$
1.66
|
|
Normalized FFO per
diluted share
|
|
$
2.12
|
|
$
2.06
|
|
$
2.04
|
|
$
1.60
|
|
$
1.66
|
|
AFFO available to
common stockholders
|
|
$
1,783,945
|
|
$
1,322,466
|
|
$
1,163,826
|
|
$
645,869
|
|
$
592,463
|
|
AFFO per diluted
share
|
|
$
2.09
|
|
$
1.98
|
|
$
1.94
|
|
$
1.73
|
|
$
1.74
|
|
Common stock dividends
paid
|
|
$
1.5460
|
|
$
1.5165
|
|
$
1.4805
|
|
$
1.4085
|
|
$
1.3915
|
|
Weighted average
diluted shares outstanding - FFO,
Normalized FFO and AFFO
|
|
854,806
|
|
669,903
|
|
599,201
|
|
373,435
|
|
340,744
|
|
ADJUSTED
EBITDAre
(dollars in
thousands)
|
|
|
Adjusted
EBITDAre, Annualized Adjusted EBITDAre, Pro Forma
Adjusted EBITDAre, Annualized Pro Forma Adjusted
EBITDAre, Net Debt/Annualized
Adjusted EBITDAre, Net Debt/Annualized Pro Forma Adjusted
EBITDAre, Net Debt and Preferred/ Annualized Adjusted
EBITDAre, and Net Debt and
Preferred/ Annualized Pro Forma Adjusted EBITDAre are
non-GAAP financial measures. Please see the Glossary for our
definition and an explanation
of how we utilize these metrics.
|
|
|
|
Three months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
Net income
|
|
$
260,968
|
|
$
197,153
|
|
Interest
|
|
246,931
|
|
183,857
|
|
Income taxes
|
|
15,642
|
|
12,932
|
|
Depreciation and
amortization
|
|
605,570
|
|
472,278
|
|
Provisions for
impairment
|
|
96,458
|
|
29,815
|
|
Merger and
integration-related costs
|
|
2,754
|
|
341
|
|
Gain on sales of real
estate
|
|
(25,153)
|
|
(7,824)
|
|
Foreign currency and
derivative (gain) loss, net
|
|
(511)
|
|
2,552
|
|
Proportionate share of
adjustments from unconsolidated entities
|
|
16,911
|
|
(411)
|
|
Quarterly Adjusted
EBITDAre
|
|
$
1,219,570
|
|
$
890,693
|
|
Annualized Adjusted
EBITDAre (1)
|
|
$
4,878,280
|
|
$
3,562,772
|
|
Annualized Pro Forma
Adjustments
|
|
$
33,813
|
|
$
87,712
|
|
Annualized Pro Forma
Adjusted EBITDAre
|
|
$
4,912,093
|
|
$
3,650,484
|
|
Total debt per the
consolidated balance sheet, excluding deferred financing
costs and net premiums and discounts
|
|
$
25,712,293
|
|
$
19,538,466
|
|
Proportionate share of
unconsolidated entities debt, excluding deferred
financing costs
|
|
659,190
|
|
—
|
|
Less: Cash and cash
equivalents
|
|
(442,820)
|
|
(253,693)
|
|
Net Debt
(2)
|
|
$
25,928,663
|
|
$
19,284,773
|
|
Preferred
Stock
|
|
167,394
|
|
—
|
|
Net Debt and Preferred
Stock
|
|
$
26,096,057
|
|
$
19,284,773
|
|
Net Debt/Annualized
Adjusted EBITDAre
|
|
5.3x
|
|
5.4x
|
|
Net Debt/Annualized Pro
Forma Adjusted EBITDAre
|
|
5.3x
|
|
5.3x
|
|
Net Debt and Preferred/
Annualized Adjusted EBITDAre
|
|
5.3x
|
|
5.4x
|
|
Net Debt and Preferred/
Annualized Pro Forma Adjusted EBITDAre
|
|
5.3x
|
|
5.3x
|
|
|
|
(1)
|
We calculate Annualized
Adjusted EBITDAre by multiplying the Quarterly Adjusted
EBITDAre by four.
|
|
(2)
|
Net Debt is total debt
per our consolidated balance sheets, excluding deferred financing
costs and net premiums and discounts, but including our
proportionate share of debt from unconsolidated entities, less cash
and cash equivalents.
|
|
The Annualized Pro
Forma Adjustments, which include transaction accounting adjustments
in accordance with U.S GAAP, consist of adjustments to
incorporate Adjusted EBITDAre from investments we acquired
or stabilized during the applicable quarter and remove Adjusted
EBITDAre from investments
we disposed of during the applicable quarter, giving pro forma
effect to all transactions as if they occurred at the beginning of
the applicable period. Our
calculation includes all adjustments consistent with the
requirements to present Adjusted EBITDAre on a pro forma
basis in accordance with Article 11 of
Regulation S-X. The Annualized Pro Forma Adjustments are consistent
with the debt service coverage ratio calculated under financial
covenants for our
senior unsecured notes. The following table summarizes our
Annualized Pro Forma Adjustments related to our Annualized Pro
Forma Adjusted EBITDAre
calculation for the periods indicated below (in
thousands):
|
|
|
|
Three months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
Annualized pro forma
adjustments from investments acquired or stabilized
|
|
$
39,329
|
|
$
87,510
|
|
Annualized pro forma
adjustments from investments disposed
|
|
(5,516)
|
|
202
|
|
Annualized Pro Forma
Adjustments
|
|
$
33,813
|
|
$
87,712
|
|
Adjusted Free Cash
Flow
(in
thousands)
|
|
|
Adjusted Free Cash Flow
and Annualized Adjusted Free Cash Flow are non-GAAP financial
measures. Please see the Glossary for our definition and an
explanation of how we utilize these metrics.
|
|
|
|
Six months
ended
June
30,
|
|
|
2024
|
|
2023
|
|
Net cash provided by
operating activities
|
|
$
1,759,845
|
|
$
1,466,113
|
|
Non-recurring capital
expenditures
|
|
(51,644)
|
|
(29,458)
|
|
Distributions paid to
common stockholders
|
|
(1,312,714)
|
|
(1,012,336)
|
|
Distributions paid to
preferred stockholders
|
|
(5,175)
|
|
—
|
|
Merger and
integration-related costs (1)
|
|
72,107
|
|
1,648
|
|
Increase in net working
capital
|
|
(37,219)
|
|
(142,475)
|
|
Lease termination
fees
|
|
(16,832)
|
|
(3,332)
|
|
Adjusted Free Cash
Flow
|
|
$
408,368
|
|
$
280,160
|
|
Annualized Adjusted
Free Cash Flow
|
|
$
816,736
|
|
$
560,320
|
|
|
(1) Excludes
share-based compensation costs recognized in merger and
integration-related costs.
|
|
CONSOLIDATED BALANCE
SHEETS
(in thousands, except
per share amounts) (unaudited)
|
|
|
|
June 30,
2024
|
|
December 31,
2023
|
|
ASSETS
|
|
|
|
|
|
Real estate held for
investment, at cost:
|
|
|
|
|
|
Land
|
|
$
16,760,251
|
|
$
14,929,310
|
|
Buildings and
improvements
|
|
39,895,617
|
|
34,657,094
|
|
Total real estate held
for investment, at cost
|
|
56,655,868
|
|
49,586,404
|
|
Less accumulated
depreciation and amortization
|
|
(6,693,997)
|
|
(6,072,118)
|
|
Real estate held for
investment, net
|
|
49,961,871
|
|
43,514,286
|
|
Real estate and lease
intangibles held for sale, net
|
|
190,570
|
|
31,466
|
|
Cash and cash
equivalents
|
|
442,820
|
|
232,923
|
|
Accounts receivable,
net
|
|
788,639
|
|
710,536
|
|
Lease intangible
assets, net
|
|
6,730,472
|
|
5,017,907
|
|
Goodwill
|
|
4,931,159
|
|
3,731,478
|
|
Investment in
unconsolidated entities
|
|
1,219,759
|
|
1,172,118
|
|
Other assets,
net
|
|
3,795,641
|
|
3,368,643
|
|
Total
assets
|
|
$
68,060,931
|
|
$
57,779,357
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
Distributions
payable
|
|
$
231,160
|
|
$
195,222
|
|
Accounts payable and
accrued expenses
|
|
884,087
|
|
738,526
|
|
Lease intangible
liabilities, net
|
|
1,704,747
|
|
1,406,853
|
|
Other
liabilities
|
|
866,992
|
|
811,650
|
|
Line of credit payable
and commercial paper
|
|
1,148,787
|
|
764,390
|
|
Term loans,
net
|
|
2,370,057
|
|
1,331,841
|
|
Mortgages payable,
net
|
|
199,031
|
|
821,587
|
|
Notes payable,
net
|
|
21,741,606
|
|
18,602,319
|
|
Total
liabilities
|
|
$
29,146,467
|
|
$
24,672,388
|
|
6.000% Series A
cumulative redeemable preferred stock and paid in
capital, par value $0.01 per share, 69,900
shares authorized, 6,900
shares and no shares issued and outstanding as
of June 30, 2024 and
December 31, 2023, respectively, liquidation
preference $25.00 per
share
|
|
$
167,394
|
|
$
—
|
|
Stockholders'
equity:
|
|
|
|
|
|
Common stock and paid
in capital, par value $0.01 per share, 1,300,000
shares authorized, 870,848 and 752,460 shares
issued and outstanding
as of June 30, 2024 and December 31, 2023,
respectively
|
|
$
46,230,789
|
|
$
39,629,709
|
|
Distributions in excess
of net income
|
|
(7,724,318)
|
|
(6,762,136)
|
|
Accumulated other
comprehensive income
|
|
75,322
|
|
73,894
|
|
Total stockholders'
equity
|
|
$
38,581,793
|
|
$
32,941,467
|
|
Noncontrolling
interests
|
|
165,277
|
|
165,502
|
|
Total
equity
|
|
$
38,747,070
|
|
$
33,106,969
|
|
Total liabilities and
equity
|
|
$
68,060,931
|
|
$
57,779,357
|
GLOSSARY
Adjusted EBITDAre. The National Association of
Real Estate Investment Trusts (Nareit) established an EBITDA metric
for real estate companies (i.e., EBITDA for real estate, or
EBITDAre) it believed would provide investors with a
consistent measure to help make investment decisions among certain
REITs. Our definition of "Adjusted EBITDAre" is generally
consistent with the Nareit definition, other than our adjustment to
remove foreign currency and derivative gain and loss, excluding the
gain and loss from the settlement of foreign currency forwards not
designated as hedges. We define Adjusted EBITDAre, a
non-GAAP financial measure, for the most recent quarter as earnings
(net income) before (i) interest expense, including non-cash
loss (gain) on swaps, (ii) income and franchise taxes,
(iii) gain on extinguishment of debt, (iv) real estate
depreciation and amortization, (v) provisions for impairment,
(vi) merger and integration-related costs, (vii) gain on sales
of real estate, (viii) foreign currency and derivative gain and
loss, net, (ix) gain on settlement of foreign currency forwards,
and (x) our proportionate share of adjustments from unconsolidated
entities. Our Adjusted EBITDAre may not be comparable
to Adjusted EBITDAre reported by other companies or as
defined by Nareit, and other companies may interpret or define
Adjusted EBITDAre differently than we do. Management
believes Adjusted EBITDAre to be a meaningful measure of a
REIT's performance because it provides a view of our operating
performance, analyzes our ability to meet interest payment
obligations before the effects of income tax, depreciation and
amortization expense, provisions for impairment, gain on sales of
real estate and other items, as defined above, that affect
comparability, including the removal of non-recurring and non-cash
items that industry observers believe are less relevant to
evaluating the operating performance of a company. In addition,
EBITDAre is widely followed by industry analysts, lenders,
investors, rating agencies, and others as a means of evaluating the
operational cash generating capacity of a company prior to
servicing debt obligations. Management also believes the use of an
annualized quarterly Adjusted EBITDAre metric is
meaningful because it represents our current earnings run rate for
the period presented. The ratio of our total debt to our annualized
quarterly Adjusted EBITDAre is also used to determine
vesting of performance share awards granted to our executive
officers. Adjusted EBITDAre should be considered along
with, but not as an alternative to, net income as a measure of our
operating performance.
Adjusted Free Cash Flow, a non-GAAP financial measure, is
defined as net cash provided by operating activities, excluding
merger and integration-related costs, changes in net working
capital and lease termination fees, less non-recurring capital
expenditures and dividends paid. We believe adjusted free cash flow
to be a useful liquidity measure for us and our investors by
helping to evaluate our ability to generate cash beyond what is
needed to fund capital expenditures, debt service and other
obligations. Notwithstanding cash on hand and incremental borrowing
capacity, adjusted free cash flow reflects our ability to grow our
business through investments and acquisitions, as well as our
ability to return cash to shareholders through dividends. Adjusted
free cash flow is not considered under generally accepted
accounting principles to be a primary measure of an entity's
residual cash flow available for discretionary spending, and
accordingly should not be considered an alternative to operating
income, net income, or amounts shown in our consolidated statements
of cash flows.
Adjusted Funds From Operations (AFFO), a non-GAAP
financial measure, is defined as FFO adjusted for unique
revenue and expense items, which we believe are not as pertinent to
the measurement of our ongoing operating performance. Most
companies in our industry use a similar measurement to AFFO, but
they may use the term "CAD" (for Cash Available for Distribution)
or "FAD" (for Funds Available for Distribution). We believe AFFO
provides useful information to investors because it is a widely
accepted industry measure of the operating performance of real
estate companies used by the investment community. In particular,
AFFO provides an additional measure to compare the operating
performance of different REITs without having to account for
differing depreciation assumptions and other unique revenue and
expense items which are not pertinent to measuring a particular
company's ongoing operating performance. Therefore, we believe that
AFFO is an appropriate supplemental performance metric, and that
the most appropriate GAAP performance metric to which AFFO should
be reconciled is net income available to common stockholders.
Annualized Adjusted EBITDAre, a non-GAAP financial
measure, is calculated by annualizing Adjusted EBITDAre.
Annualized Contractual Rent of our acquisitions and
properties under development is the monthly aggregate cash amount
charged to clients, inclusive of monthly base rent receivables, as
of the balance sheet date, multiplied by 12, excluding percentage
rent, interest income on loans and preferred equity investments,
and including our pro rata share of such revenues from properties
owned by unconsolidated joint ventures. We believe total annualized
contractual rent is a useful supplemental operating measure, as it
excludes entities that were no longer owned at the balance sheet
date and includes the annualized rent from properties acquired
during the quarter. Total annualized contractual rent has not been
reduced to reflect reserves recorded as reductions to GAAP rental
revenue in the periods presented.
Annualized Adjusted Free Cash Flow, a non-GAAP financial
measure, is calculated by annualizing Adjusted Free Cash
Flow.
Annualized Pro Forma Adjusted EBITDAre, a non-GAAP
financial measure, is defined as Adjusted EBITDAre, which
includes transaction accounting adjustments in accordance with U.S.
GAAP, consists of adjustments to incorporate Adjusted
EBITDAre from investments we acquired or stabilized during
the applicable quarter and removes Adjusted EBITDAre from
properties we disposed of during the applicable quarter, giving pro
forma effect to all transactions as if they occurred at the
beginning of the applicable quarter. Our calculation includes all
adjustments consistent with the requirements to present Adjusted
EBITDAre on a pro forma basis in accordance with Article 11
of Regulation S-X. The annualized pro forma adjustments are
consistent with the debt service coverage ratio calculated under
financial covenants for our senior unsecured notes and bonds.
Cash Income represents actual rent for real estate
acquisitions as well as rent to be received upon completion of the
properties under development. For unconsolidated entities, this
represents our pro rata share of the cash income. For loans
receivable and preferred equity investments, this represents
interest income and preferred dividend income, respectively.
Funds From Operations (FFO), a non-GAAP financial
measure, consistent with the Nareit definition, is net income
available to common stockholders, plus depreciation and
amortization of real estate assets, plus provisions for impairments
of depreciable real estate assets, and reduced by gain on property
sales. Presentation of the information regarding FFO and AFFO is
intended to assist the reader in comparing the operating
performance of different REITs, although it should be noted that
not all REITs calculate FFO and AFFO in the same way, so
comparisons with other REITs may not be meaningful. FFO and AFFO
should not be considered alternatives to reviewing our cash flows
from operating, investing, and financing activities. In addition,
FFO and AFFO should not be considered measures of liquidity, of our
ability to make cash distributions, or of our ability to pay
interest payments. We consider FFO to be an appropriate
supplemental measure of a REIT's operating performance as it is
based on a net income analysis of property portfolio performance
that adds back items such as depreciation and impairments for FFO.
The historical accounting convention used for real estate assets
requires straight-line depreciation of buildings and improvements,
which implies that the value of real estate assets diminishes
predictably over time. Since real estate values historically rise
and fall with market conditions, presentations of operating results
for a REIT using historical accounting for depreciation could be
less informative. The use of FFO is recommended by the REIT
industry as a supplemental performance measure. In addition, FFO is
used as a measure of our compliance with the financial covenants of
our credit facility.
Initial Weighted Average Cash Yield for acquisitions
and properties under development is computed as Cash Income for the
first twelve months following the acquisition date, divided by the
total cost of the property (including all expenses borne by us),
and includes our pro-rata share of Cash Income from unconsolidated
joint ventures. Initial weighted average cash yield for loans
receivable and preferred equity investment is computed using the
Cash Income for the first twelve months following the acquisition
date (based on interest rates in place as of the date of
acquisition), divided by the total cost of the investment.
Investment Grade Clients are our clients with a
credit rating, and our clients that are subsidiaries or affiliates
of companies with a credit rating, as of the balance sheet date, of
Baa3/BBB- or higher from one of the three major rating agencies
(Moody's/S&P/Fitch).
Net Debt/Annualized Adjusted EBITDAre, a
ratio used by management as a measure of leverage, is calculated as
net debt (which we define as total debt per our consolidated
balance sheet, excluding deferred financing costs and net premiums
and discounts, but including our proportionate share of debt from
unconsolidated entities, less cash and cash equivalents), divided
by Annualized Adjusted EBITDAre.
Net Debt/Annualized Pro Forma Adjusted EBITDAre, a
ratio used by management as a measure of leverage, is calculated as
net debt (which we define as total debt per our consolidated
balance sheet, excluding deferred financing costs and net premiums
and discounts, but including our proportionate share of debt from
unconsolidated entities, less cash and cash equivalents), divided
by Annualized Pro Forma Adjusted EBITDAre.
Net Debt and Preferred/Annualized Adjusted
EBITDAre, a ratio used by management as a measure of
leverage, is calculated as net debt (which we define as total debt
per our consolidated balance sheet, excluding deferred financing
costs and net premiums and discounts, but including our
proportionate share of debt from unconsolidated entities, less cash
and cash equivalents) plus our preferred stock, divided by
Annualized Adjusted EBITDAre.
Net Debt and Preferred/Annualized Pro Forma Adjusted
EBITDAre, a ratio used by management as a measure of
leverage, is calculated as net debt (which we define as total debt
per our consolidated balance sheet, excluding deferred financing
costs and net premiums and discounts, but including our
proportionate share of debt from unconsolidated entities, less cash
and cash equivalents) plus our preferred stock, divided by
Annualized Pro Forma Adjusted EBITDAre.
Normalized Funds from Operations Available to Common
Stockholders (Normalized FFO), a non-GAAP financial measure, is
FFO excluding merger and integration-related costs.
Same Store Pool, for purposes of determining the
properties used to calculate our same store rental revenue,
includes all properties that we owned for the entire year-to-date
period, for both the current and prior year except for properties
during the current or prior year that were: (i) vacant at any
time,(ii) under development or redevelopment, or
(iii) involved in eminent domain and rent was reduced.
Same Store Rental Revenue excludes straight-line
rent, the amortization of above and below-market leases, and
reimbursements from clients for recoverable real estate taxes and
operating expenses. For purposes of comparability, same store
rental revenue is presented on a constant currency basis by
applying the exchange rate as of the balance sheet date to base
currency rental revenue.
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SOURCE Realty Income Corporation